What really fueled the 2019 unicorn IPO funeral

Just six months ago, if you looked at one of the many “unicorn lists” out there that rank the most valuable privately held companies in America, you would have seen all of these names near the top: Uber, Lyft, Pinterest, Slack, Peloton, WeWork, and Palantir.

The first five names there all made it to the public market, though a couple of them arguably got there gasping for breath. Uber (UBER) is…

down 30% since its debut; Lyft (LYFT) is down 55%; Slack (WORK) is down 40%; Peloton (PTON) is down 17%. (These declines are based on Oct. 2 closing prices.)

WeWork made governance changes after huge backlash to its S-1 filing, then delayed its IPO, then finally called off its IPO. Palantir, widely thought to be planning a 2020 offering, is delaying an IPO and raising more private money instead. Endeavor, the talent house formerly called WME-IMG, called off its IPO.

Want even more examples of the polluted air in unicorn land? The gig economy platform Fiverr is down 28% since its IPO; security software company CrowdStrike (CRWD) is down 11% since its IPO; both unicorns went public in June.

The Renaissance IPO ETF (IPO) — a fund that tracks the performance of newly public companies — is down 7% in the past six months. In 2015, tech investor Bill Gurley famously predicted we’d see “dead unicorns” soon. His call may have just been four years early.

The outlook for once-hyped IPOs has clearly soured. But what really prompted the unicorn funeral?

SoftBank’s money

One common thread between two of the biggest ailing unicorns this year: SoftBank.

The Japanese multinational, through its gargantuan $100 billion Vision Fund, pumped nearly $10 billion in venture money into Uber, and more than $10 billion into WeWork.

SoftBank is spreading its bets all across Silicon Valley (some of its other investments yet to pay off include Fanatics, SoFi, and DoorDash) in an almost comically excessive display of what the VC strategy has become: throw huge amounts of money at a huge list of hot companies in the hopes a few will hit.

SoftBank deserves some of the blame for the unicorn funeral— its fat investments prompt the ballooning valuations that in turn build hype and media attention for these rarely-profitable companies, hype that stokes inflated IPO expectations.

WeWork is the ultimate example: it filed to go public with a $47 billion valuation and $12 billion in SoftBank investment— then it repeatedly lowered its own offering valuation, to $20 billion and then to $10 billion— then it yanked the IPO.

SoftBank is in the red on its Uber stake, by the way, even after cashing out nearly $250 million worth of shares at the IPO…

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